Nigeria sets new formula for interest on late tax payments

The Federal Government has issued the Nigeria Tax Administration Order 2026, changing how interest on late tax payments will be calculated from 1 October 2026. The order, signed by Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele, applies under section 65 of the Nigeria Tax Administration Act 2025. For tax payable in naira, interest will be based on the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point.

The rate cannot fall below the yield on 364-day Treasury Bills. For liabilities payable in foreign currency, the charge will be based on the Secured Overnight Financing Rate plus six percentage points. If SOFR is discontinued, its official successor will be used.

The Nigeria Revenue Service is to publish the applicable monthly rates by the third business day of each month. Oyedele said the naira spread was being reduced from five percentage points and that the new approach would tie late-payment costs more closely to market rates. He said the system was intended to give taxpayers greater certainty and prevent delayed tax from becoming cheaper than market borrowing.

The new rates will cover interest arising from 1 October 2026, including interest on tax due earlier. Interest arising before that date remains governed by the rules then in force. The order replaces the 2017 notice and earlier notices on the subject, but does not alter the 10% late-payment penalty.

Authorities retain powers to waive interest or penalties where good cause is shown.